FIRST DIVISION

[G.R. No. L-50320 : July 31, 1981.]

PHILIPPINE APPAREL WORKERS UNION, Petitioners, vs. THE NATIONAL LABOR
RELATIONS COMMISSION and PHILIPPINE APPAREL, INC., Respondents.

DECISION

MAKASIAR, J.:

Petition for Certiorari to review the decision dated September 1, 1978 of respondent
Commission which sustained the position of respondent employer and dismissed the case for
lack of merit.
It appears from the records that the petitioner, in anticipation of the expiration of their 1973-
1976 collective bargaining agreement on July 31,1976, and as an initial step for its renewal,
submitted to the respondent company a set of bargaining proposals dated June 2, 1976.
Negotiations were held thereafter between the parties; but because of an impasse, the
complainant (petitioner herein) filed on September 15, 1976 a complaint with the
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Department of Labor praying that the parties therein be assisted in concluding a collective
agreement. Notwithstanding the complaint, the parties nevertheless continued their
negotiations.
On September 3, 1977, the private respondent and petitioner concluded and signed a
collective bargaining agreement which, among other things, provided for a 3-stage wage
increase for all rank and file employees. The terms of the agreement on wage increase, which
were retroactive to April 1, 1977, follow:
“(a) Effective April 1, 1977, EIGHTY CENTAVOS [P0.80] will be added to the basic daily
wages of all said employees.
“(b) Effective April 1, 1978, FIFTY CENTAVOS [P0.50] will be added to the basic daily
wages of all said employees.
“(c) Effective April 1, 1979, FIFTY CENTAVOS [P0.50] will be added to the basic daily
wages of all said employees.”
Meanwhile, on April 21, 1977, P.D. 1123 was enacted to take effect on May 1, 1977 providing
for an increase by P60.00 in the living allowance ordained by P.D. 525. This increase was
implemented effective May 1, 1977 by the respondent company, as shown by Memorandum
No. 6-77 of the respondent company’s General Manager to all employees dated April 23,
1977 (p. 12, rec.).
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The controversy arose when the petitioner union sought the implementation of the negotiated
wage increase of P0.80 as provided for in the collective bargaining agreement. The respondent
company alleges that it has opted to consider the P0.80 daily wage increase (roughly P22
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per month) as partial compliance with the requirements of said decree, so that it is obliged to
pay only the balance of P38 per month. In effect, the payment of the additional P60 covers
both the requirements of the decree and the negotiated wage increase of P0.80 daily.
Respondent company asserts that since there was already a meeting of the minds between
the parties as early as April 2, 1977 about the wage increases which were made retroactive
to April 1, 1977, it fell well within the exemption provided for in the Rules Implementing P.D.
1123, as follows:
 “Section 1. Coverage. — These rules shall apply to all employers except the following:
xxx
“(k) Those that have granted in addition to the allowance under P.D. 525, at least
P60.00 monthly wage increase on or after January 1, 1977, provided that those who
paid less than this amount shall pay the difference.”
On the other hand, petitioner maintains that the living allowance under P.D. 1123 (originally
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P.D. 525) is distinct and separate from the negotiated wage increase of P0.80 daily [pp. 6 &
96, rec.]. In fact, it adds, when the CBA was signed by the parties on September 3, 1977,
the respondent company was fully aware of the effectivity of P.D. 1123 and had already been
paying the increased allowance provided therein [p. 94, rec.]. Hence, the respondent
company acted in bad faith when it refused to pay the negotiated wage increase in violation
of the collective bargaining agreement and the respondent company is guilty of unfair labor
practice, pursuant to the following provisions of the Labor Code:
“Article 248. Unfair Labor Practices of Employers. — It shall be unfair labor practice for
an employer:
xxx
“(J) To violate a collective bargaining agreement.”
On February 13, 1978, the petitioner filed a complaint dated February 10, 1978 for unfair
labor practice and violation of the CBA against the respondent company [pp. 13-16, rec.]. On
May 30, 1978, an Order [p. 18, rec.] was issued by Labor Arbiter Conrado B. Maglaya, the
dispositive portion of which reads as follows:
“WHEREFORE, premises considered, and by authority of Article 263 of the Labor Code
as amended, let this case be, as it is hereby, DISMISSED and the same is referred to
the parties or disputants for them to resolve their disputes, grievances or matters
arising from the implementation, application or interpretation of their Collective
Bargaining Agreement in accordance with the Machinery established in the CBA.”
From this order, both parties appealed to the respondent Commission.
Petitioner filed its appeal on June 28, 1978 [pp. 31-34, rec.] assailing the order of Labor
Arbiter Maglaya as contrary to law and the evidence adduced during the hearing, which
constitutes grave abuse of discretion amounting to lack of jurisdiction. It avers that the matter
had already been taken up on grievance but the respondent company refused to implement
the P0.80 wage increase under the CBA, and that it further refuses to submit to voluntary
arbitration. Hence, it prays for the setting aside of the Labor Arbiter’s Order and for the parties
to submit to voluntary arbitration as provided for in their CBA and the provisions of the Labor
Code.
On the other hand, respondent company filed on July 5, 1978 a partial appeal [pp. 19-27,
rec.], accepting the dismissal of the complaint but assailing that portion of the Labor Arbiter’s
Order declaring the subject matter as grievable and therefore threshable under the parties’
CBA. Its prayer was for affirmance of the dismissal, reversal of the referral to the parties for
threshing out under their CBA, and for a declaration that it has not committed an unfair labor
practice nor violated the CBA.
On September 1, 1978, the respondent Commission (Second Division) promulgated its
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decision, setting aside the order appealed from and entering a new one dismissing the case
for obvious lack of merit. The dismissal is predicated on the opinion [p. 45, rec.] of the
Undersecretary of Labor when he said:
xxx
 “If as you said, management and labor had agreed on April 2, 1977 to grant an amount
of P27.00 (roughly) per month to its employees retroactive to April 1, 1977, then the
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exemption is squarely in point, notwithstanding that the CBA was signed in May or
June. This must be so for reason that on April 7, 1977, there was already the meeting
of the minds of the parties and for legal purposes, the contract was already perfected
as of said date.”
Said the respondent Commission:
“We fully subscribe to this view. It needs no further elaboration to demonstrate that
by the facts and the terms of the law, the respondent has to pay each of the employees
concerned a total of P60.00 monthly for it to satisfy payment of both the wage increase
and the allowance.
“In resume, we find the refusal of the respondent to submit to voluntary arbitration to
be validly grounded and, therefore, not constitutive of unfair labor practice. We further
find to be untenable the complainant’s claim for full payment of both the P0.80 daily
wage increase under the CBA and the P60 allowance under P.D. 1123” [pp. 45-46,
rec.].
Petitioner than filed its motion for reconsideration but the NLRC en banc dismissed the same
in its resolution of February 8, 1979 [pp. 48-54, rec.], pursuant to Section 7, Rule II of the
Rules and Regulations Implementing P.D. No. 1391, which became effective on September
15, 1978 and provides thus —
“Sec. 7. Decisions of the Commissions. There shall henceforth be no appeal from such
decisions to the Minister of Labor except as provided in P.D. 1367 and its implementing
rules concerning appeals to the Prime Minister, and the decisions of the Commission
en banc or any of its Decisions shall be final and executory.”
Hence, the instant petition.
Petitioner maintains that private respondent violated the CBA and committed an ULP when it
refused to pay the negotiated wage increase of P0.80 daily effective April 1, 1977, to the
employees within the bargaining unit. Private respondents, however, contend that there was
no violation of the CBA and that its application of the negotiated wage increase as partial
compliance with P.D. 1123 is well within the provisions of the latter.
A perusal of the CBA shows that it was made and entered into on the 3rd day of September,
1977 by and between the parties herein (pl. see p. 1 of Annex “B” at p. 7 of NLRC rec.)
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although the first year of its increase was retroactive to April 1, 1977. At the time it was
perfected and signed by the parties, P.D. 1123 was already in force and effect. A sample pay
advice [p. 11 — insert, rec.] and the Memorandum No. 6-77 dated April 23, 1977 [p. 12, rec.]
signed by the General Manager of respondent company show that the said P.D. was
implemented by respondent company on May 1, 1977.
On the other hand, there is nothing in the records to indicate that the negotiated wage
increases were granted or paid before May, 1977. Hence, it cannot be said that the respondent
Company falls within the exceptions provided for in paragraph (k) of the rules implementing
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P.D. 1123. At the time the said P.D. took effect, there was neither a perfected contract nor
an actual payment of the said increase. There was therefore no grant of said increases as yet,
despite the contrary opinion expressed in the letter of Undersecretary of Labor Amado G.
Inciong.
The said letter dated May 13, 1977 [p. 33, NLRC rec.] of Undersecretary Inciong is based on
a wrong premise and misrepresentation on the part of respondent company. It was alleged
in the letter of respondent company that the wage increases were “agreed upon by the
company and the bargaining union on April 2, 1977 in recognition of the imperative need for
employees to cope up with inflation brought about by, among others, another increase in oil
price” [p. 31, NLRC rec.]. It was not, however stated that at the time the said letter was
written, negotiations were still being held “on other unresolved economic and non-economic
bargaining items and it was only on September 3, 1977 when they reached agreement
thereon” [pl. see p. 7 of private respondent’s Memorandum, p. 107, rec.].
There was therefore no binding contract between the parties before September 3, 1977. For
“if any essential item is left open for future consideration, there is no binding contract, and
an agreement to reach an agreement imposes no obligation on the parties thereto” [17 Am.
Jur., 2d 362].
Such being the case, and without actual payment of the agreed P0.80 wage increase, there
could have been no “grant” of wage increases within the contemplation of paragraph K,
Section 1 of the Rules Implementing P.D. 1123 to place the respondent company within the
purview of the exemption provided for in the said rules.
Consequently, its refusal to implement the P0.80 wage increase for the first year of the CBA
constitutes a violation thereof and makes the respondent company guilty of unfair labor
practice.
The respondent company is also guilty of bad faith when it signed the CBA on September 3,
1977 without in any way letting the petitioner union know that it was going to apply part of
the allowances being paid under P.D. 1123 to the wage increases provided for in the CBA.
Between the time of the implementation of P.D. 1123 on May 1, 1977 and the signing of the
CBA on September 3, 1977, nothing was said between the parties about the wage increase
despite the fact that negotiations were still going on between the parties. The exchange of
letters between the respondent company and Labor Undersecretary Inciong appears to have
been concealed from the union. According to the respondent Commission, “the wage
increase (however) was not immediately implemented because Mr. Alfred Flug who was to
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bring home funds was still in the United States” [p. 40, rec.]. It was only upon arrival from
the U.S.A. on January 19, 1978 of Robert Flug, son of said Alfred Flug, that the union had an
inkling that the company will not pay the negotiated wage increase. At this point the CBA was
already perfected and signed by the parties, so that its terms and stipulations have the force
of law between them.
A collective bargaining agreement is the law between the parties (Kapisanan ng mga
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Manggagawa sa La Suerte-FOITAF vs. Noriel, 77 SCRA 414). In the construction or

interpretation of such a contract, the primary purpose and guideline and indeed the very
foundation of all the rules for such construction or interpretation is the intention of the
parties (17 Am. Jur. 2d., 631).
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What was the intention of the parties relative to the wage increases? A cursory reading of the
CBA indicates that the benefits provided therein are not exclusive of other benefits, as may
be gleaned from the provisions of its Section 4, Article XIV [p. 42 of the CBA at p. 6, NLRC
rec.], which speaks of “any other benefits or privileges which are not expressly provided in
this Agreement, even if now accorded or hereafter accorded to the employees and workers,
shall be deemed purely acts of grace . .”
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Likewise, in the accompanying Memorandum of Understanding [pp. 82-83, NLRC rec.] dated
September 3, 1977, the parties have agreed as follows:
“1. As long as it does not contravene the law and its implementing rules and
regulations the COMPANY agrees to effect a uniform and indiscriminate wage increase
in the salaries of its employees within the bargaining unit represented by the UNION
regardless of their position and pay rates, in the event that the government shall direct
another increase(s) in the statutory minimum wage fixed under P.D 928 within the
period of three years from the signing of this instrument. The uniform increase
 contemplated in this instrument will be equivalent to the amount of the statutory wage
increase or adjustment.”
The bases of the dissent of Madame Justice Herrera are that:
I. The P0.80 per day increase was already granted as early as April 2, 1977 when the
company agreed to give wage increases to its employees effective April 1, 1977.
Hence, such grant should be credited against the emergency cost of living
allowance (ECOLA) provided for by P.D. 1123.
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II. The Department’s (Labor) view on the matter of exemptions from P.D. 1123 should
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be given weight since it was not interpreting or construing a statute but explaining the
extent of its own rule.
III. It is inequitable that an employer who has granted increases in pay to his
employees on a given day is further ordered to give additional increases one, two or
three days thereafter.
IV. Social justice requires that the broader requirements of a stable economy should
be taken into account in resolving conflicts between labor and management.
I
There is no controversy that the first year’s wage increase under the CBA was supposed to
retroact to April 1, 1977. There is likewise no question that had the company paid the eighty
centavos daily increase in April 1977, the conclusion would have been unquestionable that
such negotiated wage increase (NWI) should be credited against the emergency cost of living
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allowance (ECOLA) under P.D. 1123.

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The question arose because, first, there was no such payment either before or after the
effectivity of P.D. 1123 on May 1, 1977; and second, because there was no binding contract
to speak of on May 1, 1977.
It is conceded that the word “grant” in its broader sense may include “to agree or assent to;
to allow to be fulfilled; to accord; to bestow or confer; and is synonymous with ‘concede’
which means to agree on the idea of bestowal or acknowledgment especially of a right or
privilege” (Woods vs. Reilly, 211 S.W. 2d 591, 597). Such being the case, the “grant” could
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be said to have been made at the time of the agreement, although there may not have been
payment as yet.
But the question is, when was the inception or actual birth of the agreement? The company
contends that it was on April 2, 1977, whereas the Union alleges that it was only on September
3, 1977, the date of the CBA.
Paragraph 1 of the CBA reads:
“This agreement, made and entered into this 3rd day of September 1977 . .” c ra c han roblesv irt ualawli bra ry (p. 7,
NLRC rec.).
On the other hand, there is nothing in the record to indicate that the P0.80 wage increase
was indeed agreed upon on April 2, 1977. Aside from the self-serving statements of the
company in its various communications (pp. 121, 125 and 128, rec.) and pleadings (pp. 73
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and 102, rec.), the only other reference to said date is found on the second paragraph of page
1 of the Memorandum of Understanding dated September 3, 1977 (p. 82, NLRC rec.) which, c ranad

however, does not mention anything about the 80-centavo increase effective April 1, 1977.
In fact, the said paragraph speaks of the company’s commitment to effect uniform and
indiscriminate wage increases among its employees within the bargaining unit represented by
the union in the event that the government shall, within a period of three (3) years from c ranad

execution hereof, direct additional increases in the statutory minimum wage fixed under P.D.
928. In other words, what was agreed upon on April 2, 1977, was a conditional increase
contingent upon the government’s increasing of the statutory minimum wage then prevailing.
Is it not possible that the company’s decision to give the P0.80 daily increase effective April
1, 1977 was influenced by the knowledge that it could be absorbed by the additional ECOLA
provided for by P.D. 1123, and that such decision was definitely made after receipt of the
letter dated July 15, 1977 of then Undersecretary Inciong (p. 130, rec.)? c ranad

In any case, the company admits that after April 1977 there were “negotiations on other
unresolved economic and non-economic bargaining items and it was only on September 3,
1977 when they reached agreement thereon.” (p. 107, rec.). chan rob lesvirtualawl ibra ry

This brings us to no other conclusion that the agreement was born only on September 3,
1977:
“Mere preliminary negotiations as to the terms of an agreement do not constitute a
contract. A complete contract is effected generally only by an agreement as to all the
terms which the parties intend to introduce into the contract, and where such is the
intention of the parties, by the execution of a formal written instrument embodying
those terms” (17 C.J.S. 390).
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“Where preliminary negotiations are consummated by a written contract, or an oral

agreement is evidenced by a subsequent agreed memorandum in writing, the writing
supersedes all previous understandings and the intent of the parties must be
ascertained therefrom . .” (17 C.J.S. 750). c ra cha nrob lesvi rtua lawlib rary

In the light of the foregoing, there was therefore no “grant” of the wage increase as of May
1, 1977 to enable the company to avail of the exemption under P.D. 1123.
II
It is also conceded that the Department of Labor had the right to construe the word “grant”
as used in its rules implementing P.D. 1123, and its explanation regarding the exemptions to
P.D. 1123 should be given weight. However, when it is based on misrepresentations as to the
existence of an agreement between the parties, the same cannot be applied. At any rate, the
opinion of then Undersecretary Inciong about the matter is based on the wrong premise that
there was already an agreement (“If as you said management and labor agreed on April 2,
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1977 . .”, p. 33, NLRC rec.). There is no such agreement perfected on April 2, 1977.
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There is no distinction between interpretation and explaining the extent and scope of the law;
because where one explains the intent and scope of a statute, he is interpreting it.
The construction or explanation of then Undersecretary Inciong is not only wrong as it was
purely based on a misapprehension of facts, but also unlawful because it goes beyond the
scope of the law as hereinafter demonstrated.
III
The CBA entered into between the parties on September 3, 1977 created certain obligations
between the parties which they are bound to keep without being “ordered” to do so. The
principle of equity need not even come in, for “unless fraud, mistake or the like is set up, a
court will not disturb contract rights as evidenced by a writing which purports to express the
intention or will of the parties . .” (27 Am. Jur. 594). c ra chan rob lesvi rtualaw lib rary

A cursory reading of the CBA dated September 3, 1977 reveals the following intentions of the
parties:
a. That the wage increases thereunder should be staggered for a 3-year period retroactive
to April 1, 1977 (see page 2 of Private Respondent’s Memorandum, p 102, rec.); and
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 b. That such wage increases are exclusive of any statutory increase in the minimum wage,
obliging the company to effect a uniform and indiscriminate wage increase equivalent
to the increase or adjustment in the minimum wage that may be decreed within a
period of three years from the signing of the instrument on September 3, 1977 (see c ranad

par. 1 of the Memorandum of Understanding, p. 83, NLRC rec.).

The staggered wage increase will not be achieved if the same were to be absorbed by the
P60-increase in the ECOLA. For a computation of NWI under the CBA will approximately
amount to the following:
First year — P0.80 daily or approximately P22/mo.
Second year — .50 daily or approximately 13.75/mo.
Third year — .50 daily or approximately 13.75/mo.
Monthly total for 3 years P49.50
Thus, it will be seen that because the resultant total in the monthly-wage increase over the
3-year period under the CBA is less than P60.00, the same will always be covered by the
ECOLA, and there will be no occasion for a staggered increase during the period other than
what the law may provide — which is not the intention of the parties.
It is submitted that had the parties intended that to be the end, they should have incorporated
the same in their CBA or in their Memorandum of Understanding.
It is also apparent that the crediting of the NWI in the ECOLA was an afterthought on the part
of the company. If not, then the company was in bad faith when it did not mention its plan to
credit the NWI to the ECOLA during the negotiations prior to the signing of the CBA on
September 3, 1977, as soon as it received the opinion of then Undersecretary Inciong in his
letter of July 13, 1977 (p. 130, rec.).
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IV
It is submitted that the principle of social justice will be better served by upholding the
protection-to-labor policy guaranteed by the Constitution.
The Honorable Chief Justice Enrique M. Fernando, in explaining the concept of social justice,
wrote:
“What is thus stressed is that a fundamental principle as social justice, identified as it
is with the broad scope of the police power, has an even more basic role to play in
aiding those whose lives are spent in toil, with destitution an ever-present threat, to
attain a certain degree of economic well-being. Precisely, through the social justice
coupled with the protection to labor provisions, the government is enabled to pursue
an active and militant policy to give reality and substance to the proclaimed aspiration
of a better life and more decent living conditions for all. It is in that spirit that in 1969,
in Del Rosario vs. Delos Santos (L-20586, March 21, 1969, 22 SCRA 1196), reference
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was made to what the social justice concept signifies in the realistic language of the
late President Magsaysay: ‘He who has less in life should have more in law.’ After
tracing the course of decisions which spoke uniformly to the effect that the tenancy
legislation, now on the statute books, is not vitiated by constitutional infirmity, the Del
Rosario opinion made clear why it is easily understandable ‘from the enactment of the
Constitution with its avowed concern for those who have less in life, [that] the
constitutionality of such legislation has been repeatedly upheld.’ What is sought to be
accomplished by the above fundamental principle is to assure ‘the effectiveness of the
community’s effort to assist the economically underprivileged. For under existing
conditions, without succor and support, they might not, unaided, be able to secure
 justice for themselves” chanroblesvirtualawlibra ry (Fernando, Enrique M., Constitution of the Philippines, pp.
80-81 [1974]).
More than elusive justice, survival is the daily problem of the worker and his family. The
employer is not faced with such a problem. More often than not, the employer dissipates part
of his income or profit in pleasures of the flesh and gambling aside from luxuries, fabulous
parties and conspicuous consumption.
The stability of the economy does not depend on the employer alone, but on government
economic policies concerning productivity in all areas and not only in the clothing or textile
industries. There is not even an intimation that the company is losing. It is the living wage of
the workers which is the basis of a stable economy. If the company cannot pay a living wage,
it has no business operating at the expense of the lives of its workers from the very start.
The preservation of the lives of the citizens is a basic duty of the State, more vital than the
preservation of the profits of the corporation. When the State is engaged in a life-and-death
struggle, like war or rebellion, it is the citizen worker who fights in defense of the State and
for the preservation of the existence of corporations and businesses within its territorial
confines. When the life of the State is threatened from within and without, it is the citizen,
not the corporation or business enterprise, that mans the weapons of war and march into
battle.
To invoke the nebulous term “stable economy” to justify rejection of the claims of the workers
as against the assets of the employer, is to regard human life as more expendable than
corporate capital. There is nothing in the Constitution that expressly guarantees the viability
of business enterprises much less assuring them of profits.
V
Moreover, it must be pointed out that the Secretary of Labor has exceeded his authority when
he included paragraph (k) in Section 1 of the Rules Implementing P.D. 1123.
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Section 1 of said decree spells out the scope of its benefits, as follows:
“Section 1. In the Private Sector. — In the private sector, an across-the-board increase
of sixty pesos (P60.00) in emergency allowance as provided in P.D. 525 shall be paid
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by all employers to their employees effective 1 May 1977. Accordingly, the monthly
emergency allowance under P.D. 525 is hereby amended as follows:
“a) For workers being paid P50.00 P110
“b) For workers being paid P30.00 90
“c) For workers being paid P15.00 75.”
To implement P.D. 1123, the then Secretary of Labor was authorized in Section 4 of
the same decree to issue appropriate rules and regulations. Such authority is quoted
hereunder:
“Sec. 4. The Secretary of Labor and the Commissioner of the Budget shall issue
appropriate rules and regulations to implement this Decree for their respective sectors.
Under such rules and regulations, distressed employers whether public or private may
be exempted while in such condition in the interest of development and employment.”
By virtue of such rule-making authority, the Secretary of Labor issued on May 1, 1977 a set
of rules which exempts not only distressed employers (see paragraph 1, Section 1 as well as c ranad

Sections 6, 7, 8 and 9 of said rules) but also “those who have granted in addition to the
allowance under P.D. 525, at least P60.00 monthly wage increase on or after January 1, 1977,
provided that those who paid less than this amount shall pay the difference (see paragraph c ranad

k of said rules).
Clearly, the inclusion of paragraph k contravenes the statutory authority granted to the
Secretary of Labor, and the same is therefore void, as ruled by this Court in a long line of
cases among which are:
1. Teozon vs. Members of the Board of Administrators, PVA (33 SCRA 585, 588-589): c rana d

“The recognition of the power of administrative officials to promulgate rules in the

administration of the statute, necessarily limited to what is provided for in the
legislative enactment, may be found in the early case of United States vs. Barrios
decided in 1908. Then came in a 1914 decision, United States vs. Tupasi Molina (29 cranad

Phil. 119) delineation of the scope of such competence. Thus: ‘Of course the
regulations adopted under legislative authority by a particular department must be in
harmony with the provisions of the law, and for the sole purpose of carrying into effect
its general provisions. By such regulations, of course, the law itself cannot be
extended. So long, however, as the regulations relate solely to carrying into effect the
provisions of the law, they are valid.’ In 1936, in People vs. Santos, this Court
expressed its disapproval of an administrative order that would amount to an excess
of the regulatory power vested in an administrative official. We reaffirmed such a
doctrine in a 1951 decision, where we again made clear that where an administrative
order betrays inconsistency or repugnancy to the provisions of the Act, ‘the mandate
of the Act must prevail and must be followed.’ Justice Barrera, speaking for the Court
in Victorias Milling Inc. vs. Social Security Commission, citing Parker as well as Davis
did tersely sum up the matter thus: ‘A rule is binding on the Courts so long as the
procedure fixed for its promulgation is followed and its scope is within the statutory
authority granted by the legislature, even if the courts are not in agreement with the
policy stated therein or its innate wisdom . . On the other hand, administrative cra

interpretation of the law is at best merely advisory, for it is the courts that finally
determine what the law means.’
“It cannot be otherwise as the Constitution limits the authority of the President, in
whom all executive power resides, to take care that the laws be faithfully executed.
No lesser administrative executive office or agency then can, contrary to the express
language of the Constitution, assert for itself a more extensive prerogative.
Necessarily, it is bound to observe the constitutional mandate. There must be strict
compliance with the legislative enactment. Its terms must be followed. The statute
requires adherence to, not departure from its provisions. No deviation is allowable. In
the terse language of the present Chief Justice, an administrative agency ‘cannot
amend an act of Congress.’ Respondents can be sustained, therefore, only if it could
be shown that the rules and regulations promulgated by them were in accordance with
what the Veterans Bill of Rights provides” (Emphasis supplied).
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2. Santos vs. Hon. Estenzo, et al. (109 Phil. 419):

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“It is of elementary knowledge that an act of Congress cannot be amended by a rule

promulgated by the Worker’s Compensation Commission.”
3. Hilado vs. Collector of Internal Revenue (100 Phil. 295):
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“It seems too clear for serious argument that an administrative officer cannot change
a law enacted by Congress. A regulation that is merely an interpretation of the statute
when once determined to have been erroneous becomes a nullity.”
4. Sy Man vs. Jacinto & Fabros (93 Phil. 1093):
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“. . We also find and hold that the memorandum order of the Insular Collector of
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Customs of August 18, 1947, is void and of no effect, not only because it has not been
duly approved by the Department Head and fully published as required by Section 551
 of the Revised Administrative Code but also because it is inconsistent with law . . cra

“ (Emphasis supplied).
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5. Olsen & Co., Inc. vs. Aldenese and Trinidad (43 Phil. 259): cranad

“The important question here involved is the construction of Sections 6, 7 and 11 of

Act No. 2613 of the Philippine Legislature, and Section 9 of the ‘Tobacco Inspection
Regulations,’ promulgated by Administrative Order No. 35. It must be conceded that
the authority of the Collector of Internal Revenue to make any rules and regulations
must be founded upon some legislature act, and that they must follow and be within
the scope and purview of the act.”
In the light of the foregoing, paragraph (k) of the Rules Implementing P.D. 1123 must be
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declared void. Consequently, the argument about crediting the NWI against the ECOLA has
no more leg to stand on and must perforce fall.
It is also obvious that the negotiated wage increases provided for in the CBA are intended to
be distinct and separate from any other benefit or privilege that may be forthcoming to the
workers.
The respondent company must perforce pay both the benefits under P.D. 1123 and the CBA.
Its refusal to pay the wage increase provided for in the latter constitutes a question that
should have been settled before a voluntary arbitrator.
Moreover, in case of doubt, all labor legislation and all labor contracts shall be construed in
favor of the safety and decent living for the laborer (Insular Lumber Co. vs. CA, 80 SCRA 28, c ranad

citing Art. 1702, Civil Code of the Philippines).

Consequently, We find that the respondent Commission acted with grave abuse of discretion
when it dismissed petitioner’s case and upheld the private respondent’s posture in the absence
of substantial evidence in support thereof.
WHEREFORE, THE WRIT OF CERTIORARI IS HEREBY GRANTED, THE DECISION OF THE
RESPONDENT COMMISSION IS HEREBY SET ASIDE, AND PRIVATE RESPONDENT IS HEREBY
DIRECTED TO PAY, IN ADDITION TO THE INCREASED ALLOWANCE PROVIDED FOR IN P.D.
1123, THE NEGOTIATED WAGE INCREASE OF P0.80 DAILY EFFECTIVE APRIL 1, 1977 AS WELL
AS ALL OTHER WAGE INCREASES EMBODIED IN THE COLLECTIVE BARGAINING AGREEMENT,
TO ALL COVERED EMPLOYEES. COSTS AGAINST PRIVATE RESPONDENT.
THIS DECISION IS IMMEDIATELY EXECUTORY.
SO ORDERED.
Fernandez, Guerrero and De Castro, JJ., concur.

Separate Opinions
TEEHANKEE, J., concurring:
I concur with the Court’s judgment holding that contrary to respondents’ stand, the P60. —
ECOLA (emergency cost of living allowance) increase provided in P.D. 1123 issued on April
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21, 1977 to take effect May 1, 1977 is not creditable to nor deductible from the negotiated
wage increases (NWI) negotiated and agreed by the parties in their collective bargaining
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agreement (CBA) executed on September 3, 1977 (providing for staggered wage increases
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for the workers for the three year period of the CBA in the “munificent” total of P49.50 per
month, much less than the P60. — ECOLA increase effective immediately, as follows: 80
centavos daily or approximately P22.00 increase per month for the 1st year, 50 centavos
daily or around P13.75/month increase for the 2nd year and 50 centavos daily or around
P13.75/month increase for the 3rd year.)
Even conceding that the parties had arrived at a partial agreement on April 2, 1977 that the
employees would be given the 80-centavo daily wage increase retroactive to April 1st, 1977,
still the memorandum of understanding dated September 3, 1977 as signed by the
parties (pp. 82-83, NLRC record) clearly shows the intent of the parties that such negotiated
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staggered wage increases were exclusive of any statutory increase in the minimum wage and
that the respondent employer obliged itself to effect a uniform and indiscriminate wage
increase equivalent to the increase or adjustment in the minimum wage that may be decreed
within a period of three years from the signing of the CBA on September 3, 1977. 1 The
ECOLA is after all, in effect, another means of effecting an increase in the minimum wage.
The conduct of the parties before and after the signing on September 3, 1977 of the CBA bear
out the parties’ clear understanding and agreement that the P60. — ECOLA increase effective
May 1, 1977 was not to be taken into account or to be deducted from the negotiated wage
increases amounting to a total of P49.50 for the third year of the CBA. Reason and experience
rebel against the contrary assertion. If after all, the negotiated wage increases in such a
“munificent” total of P49.50 for the third year of the CBA (and for a total of only
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P35.75/month for the 2nd year of the CBA) were to be charged against the P60. — ECOLA
increase, the long negotiations for the staggered wage increases for the three-year duration
of the CBA would be of no use or meaning, for the workers were already receiving the total
P60. — increase from May 1, 1977, without need of the CBA.
The CBA then would work against instead of enhancing the very interests of the workers, as
witness the posture taken by respondent-employer some months after its execution that
implementation of the CBA wage increases meant that the agreed P22./month wage increase
won by the workers in the CBA was to be set off against the ECOLA so that it had to pay only
a balance of P38./month for the ECOLA on the basis of the opinion it had unilaterally secured
from the Undersecretary of Labor on July 15, 1977 that such wage increase had been
“granted” by it on April 1, 1977 and could be deducted from the ECOLA as against the
undisputed fact that it has not up to now paid a centavo of the agreed wage increase, even
of P22./month for the 1st year of the CBA from September 3, 1977 it had supposedly granted
since April 1, 1977 nor a centavo of the stipulated staggered increases for the last 2 years of
the CBA. Thus, the 3-year period of the CBA expired last September 3, 1980 without the
workers having received the negotiated wage increases stipulated in the CBA due to
respondent employer’s success so far in tying up the payment thereof by reason of the
erroneous opinion of July 15, 1977 it had unilaterally secured from the Undersecretary of
Labor.
It should be noted that beginning May 1, 1977, respondent-employer commenced paying the
workers the P60. — ECOLA increase without any qualification or condition that would tie it up
or make deductible therefrom the wage increases that it was then negotiating with the
workers. Even after it had unilaterally obtained on July 15, 1977 Undersecretary Inciong’s
favorable (to it) opinion, it never divulged nor apprised the workers thereof during the
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negotiations that they were still conducting. So, even if we were to be kind and not impute
bad faith to the company and say that its non-disclosure of Undersecretary Inciong’s opinion
resulted in some ambiguity concerning the negotiated wage increases, this was attributable
to itself alone and therefore must be resolved against it.
There is basis for the majority judgment’s holding that the implementing rule of the then
Secretary of Labor in crediting the NWI against the ECOLA is void for being in excess and
contravention of the statutory authority which exempted only distressed employers from the
ECOLA, but I do not deem it necessary to concur in such ruling due to my conclusions above
stated that the parties clearly understood and intended that the P60.-ECOLA increase which
respondent-employer had been paying to the workers since May 1, 1977 would not be charged
against the staggered NWI in the September 3, 1977 CBA which amounted to a “munificent”
total of P49.50 for the three years of the CBA which expired last September 3, 1980 and
which the workers have yet to be paid, due to the one-sided and oppressive stand adopted
by respondent-employer.

MELENCIO-HERRERA, J., dissenting:

I vote to dismiss the Petition for Certiorari.
The facts of this case are as follows: Private respondent (the COMPANY, for short) is a
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corporation engaged in the garment industry with about 2,000 employees, whose bargaining
representative is petitioner (the UNION for short). COMPANY and UNION had a 1973-1976
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CBA, which expired on July 31, 1976. On June 2, 1976, the UNION submitted to the COMPANY
proposals for the renewal of the CBA. Negotiations were thereafter held (p. 62, NLRC Record).
cranad

On April 2, 1977, COMPANY and UNION agreed, partially, that the employees would be given
an across-the board increase in regular wages of P0.80 per day retroactive to April 1st. This
fact is confirmed by a Memorandum of Understanding of the parties (p. 82, NLRC Record).
c ranad

Because there were other unresolved issues, the new CBA was not signed until September 3,
1977.
In the meantime, PD 1123 was issued by the President on April 21, 1977 to take effect on
May 1, 1977. The decree provided that employees then receiving P50 a month as Emergency
Cost of Living Allowance (ECOLA) should be given an increase in the sum of P60.00 a month.
crana d

The Decree further provided:

“SEC. 4. The Secretary of Labor and the Commissioner of the Budget shall issue
appropriate rules and regulations to implement this Decree for their respective sectors.
Under such rules and regulations, distressed employers whether public or private may
be exempted while in such condition in the interest of development and employment.”
The Secretary of Labor subsequently promulgated Rules and Regulations for the
implementation of PD 1123. Section 1 (k) thereof provided that:
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“Section 1. — Coverage — These rules shall apply to all employers except the
following:
xxx
(k) Those that have granted, in addition to the allowance under PD 525, at least P60.00
monthly wage increase on or after January 1, 1977, provided that those who paid less
than this amount shall pay the difference.”
The meaning of the rule is that when an employer had “ granted” increases to his employees
after January 1, 1977, such increases shall be credited against the P60.00 ECOLA provided in
PD 1123. Considering that the Secretary of Labor could exempt distressed employers from
complying with PD 1123, it is believed that the regulation to debit the P60.00 ECOLA with
wage increases granted to employees after January 1, 1977 was within the authority of the
Secretary to make.
Giving credit to employers for increases granted to employees within a short period before an
ECOLA becomes effective is a sound rule. It is inequitable that an employer, who has granted
increases in pay to his employees on a given day, is further ordered to give additional
increases one, two or three days thereafter. The arrangement or policy, was followed by the
Secretary in regards to PD 1614 which became effective on April 1, 1979. Increases granted
to employees after December 1, 1978 could be credited against the ECOLA provided in that
Decree. The policy was expressly followed in PD 1634 which itself provided that the P60.00
ECOLA, effective September 1, 1979, could be lessened by the increases granted to
employees on or after August 1, 1979. In PD 1678, the ECOLA which became effective
February 20, 1980 was credited with increases in wages granted on or after February 8, 1980.
In PD 1713, the ECOLA increase was effective on August 18, 1980, and it was credited with
increases granted after July 1, 1980. In Wage Order No. 1, the ECOLA increase payable
beginning March 22, 1981 was to be debited with voluntary increases given between January
1 to March 22, 1981.
On May 1, 1977, the COMPANY gave its employees the P60.00 ECOLA provided in PD 1123.
On May 13, 1977, the COMPANY wrote to the Department of Labor asking if the wage increase
of P0.80 a day agreed upon on April 2, 1977 between the COMPANY and the UNION,
retroactively to April 1, 1977, could be credited against the ECOLA provided in PD 1123 (p. cranad

31, NLRC Record). The reply of July 15, 1977 was in the affirmative, the Department stating:
“If as you said, management and labor had agreed on April 2, 1977 to grant an amount
of P22.00 (roughly) per month to its employees retroactive to April 1, 1977, then the
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exemption is squarely in point, notwithstanding that the CBA was signed in May or
June. This must be so for reason that on April 2, 1977, there was already the meeting
of the minds of the parties and for legal purposes, the contract was already perfected
as of said date.” (italics supplied) (p. 33, NLRC Record)
cha nrob lesvi rtua lawlib rary cranad

After the new CBA was signed on September 3, 1977, the UNION raised the question of
creditability of the April 1 increase of P0.80 a day to the May 1 ECOLA. The matter was taken
up in grievance procedure, but on January 21, 1978, the COMPANY took the definite stand in
favor of the creditability (p. 2, NLRC Record). Whereupon, the UNION filed a complaint with
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the Department of Labor against the COMPANY for unfair labor practice in regards to the
creditability question, and asked that a voluntary arbitrator be agreed upon. On May 30, 1978,
the Labor Arbiter dismissed the UNION’s complaint, and said that the issue should be resolved
through further proceedings under the grievance machinery established in the CBA.
The decision of the Labor Arbiter was appealed to the National Labor Relations
Commissions (NLRC) which, on September 1, 1978, set aside the decision of the Labor
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Arbiter and dismissed the complaint of the UNION finding “to be untenable the complainant’s
claim for full payment of both the P0.80 daily wage increase under the CBA and the P60.00
allowance under PD 1123” (p. 46, Rollo). It is this Order of the NLRC which has been
chan roble svi rtualawl ib rary

brought to this instance for review on Certiorari.

It should be relevant to cite the following statement in Victorias Milling Company, Inc. vs.
Social Security Commission in 4 SCRA 627, 630:
“A rule is binding on the courts so long as the procedure fixed for its promulgation is
followed and its scope is within the statutory authority granted by the legislature, even
if the courts are not in agreement with the policy stated therein or its innate
wisdom (Davis, op. cit., 195-197). On the other hand, administrative interpretation
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of the law is at best merely advisory, for it is the courts that finally determine what
the law means.”
Section 1 (k) of the Rules and Regulations for the implementation of PD 1123 is part of the
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“law” binding on Courts. If the P0.80 per day increase had actually been paid to the employees
on April 1st, the conclusion should be unquestionable that such increase was deductible from
the May 1st ECOLA. The problem in this case has arisen because that P0.80 increase, definitely
promised on April 2nd to be given as of April 1st, was not given until it was absorbed by the
ECOLA which began to be payable on May 1st. After the Department’s reply to the COMPANY
of July 15, 1977, the matter of the P0.80 per day increase became dormant until it was
resuscitated with the execution of the CBA on September 3, 1977.
It will be seen that in the Department’s letter to the COMPANY of July 15, 1977, it had
construed the word “granted” in section 1 (k) as not necessarily requiring an accomplished cra nad

fact. “The word grant is used therein in its broader meaning so as to be all embracing, and
includes both the creation of the obligation and the actual extension, enjoyment of the wage
increase.” A definite agreement to increase within the time frame should already be deemed
as a “granted” increase. The Oxford English Dictionary (Vol. IV) defines “grant” and “granted” cra nad

as follows:
“Grant” — (grant), sb. 1 Forms: see the vb. (f. the vb.) The action of granting; the
c ranad c ranad

thing granted. + 1. a. Consent, permission. b Promise. c. Admission, acknowledgment.

Also, what is agreed to, promised, admitted, etc. Obs.” (p. 355). chan roble svirtualawl ibra ry

“Granted” — (granted), ppl. a. (f. GRANT v. + -Ed1.) In senses of the vb. 1.

c ranad cra nad

Bestowed, allotted.” (p. 356). (Emphasis supplied).

chan roble svirtualawl ibrary c ranad

In Woods v. Reilly, Tex. Civ. App., 211 S.W. 2d 591, 597, it was said, in reference to “grant”
and “granted”, that:
“Grant” means to agree or assent to; to allow to be fulfilled; to accord; to bestow or
confer; and is synonymous with ‘concede’ which means to agree in the idea of bestowal
or acknowledgment, especially of a right or privilege.”
“Granted” within provision of Teacher’s Retirement Act defining ‘retirement’ as
withdrawal from active service with a retirement allowance ‘granted’ under provisions
of the Act, was not intended to mean ‘immediately payable’.”
One thing is for sure. The Department had the right to construe the word “granted”, as used
in Section 1 (k). The construction it had adopted cannot be viewed as so wrong as to allow
cranad

us to reverse it. The rule followed in this jurisdiction since Madrigal vs. Rafferty (38 Phil. 414 crana d

[1918]) is that great weight shall be given to the interpretation or construction given to a
statute by the Government agency called upon to implement the statute. In this case, the
weight in favor of the Department of Labor should be greater, because the Department is not
interpreting or construing a statute, but it had explained the extent of its own rule.
On the other hand, it is rather evident that the Department’s construction of the word
“granted” as used in Section 1 (k), as well as the NLRC Order dismissing the UNION’s
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complaint, is reasonable. As previously explained, the objective of Section 1 (k) is to give crana d

equitable treatment to employers who have granted “voluntary” increases to their employees
on a given date. They should not be subjected to further “compulsory” increases one, two or
three days thereafter. “Voluntary” increases which the employers had granted within a
reasonable period previous to the effectivity of the “compulsory” increases should be credited
against such “compulsory” increases. There can be no substantial difference between
“voluntary” increases actually paid, and “voluntary” increases definitely agreed to be paid and
which would have been actually paid were it not for its absorption by the “compulsory”
increases. The rationale of Section 1 (k) is applicable to both situations. crana d

Lastly, it is well to remember that economic matters, such as wages, are imbued with public
interest. The broader requirements for the maintenance of a stable economy should also be
taken into account in resolving conflicts between labor and management.
It may be pertinent to recall herein Justice Laurel’s classic definition of social justice, a
fundamental principle enshrined in both the 1935 and the 1973 Constitutions:
“. . Social justice means the promotion of the welfare of all the people, the adoption
cra

by the Government of measures calculated to insure economic stability of all the

competent elements of society, through the maintenance of a proper economic and
social equilibrium in the interrelations of the members of the community,
constitutionally, through the adoption of measures legally justifiable, or extra-
 constitutionally, through the exercise of powers underlying the existence of all
governments on the time-honored principle of salus populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the necessity of
interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social
and economic life, consistent with the fundamental and paramount objective of the
state of promoting the health, comfort, and quiet of all persons, and of bringing about
‘the greatest good to the greatest number’.” (Calalang vs. Williams, 70 Phil. pp.
chan roble s virtua lawlib rary

726, 734-735 [1940]) (Emphasis supplied)

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It is in view of the foregoing considerations that I vote for the dismissal of the Petition
for Certiorari.

Endnotes
1. The pertinent provision of the Memorandum of Understanding, as reproduced in the judgment
(at page 8) reads: “1. As long as it does not contravene the law and its implementing rules and
regulations the COMPANY agrees to effect a uniform and indiscriminate wage increase in the
salaries of its employees within the bargaining unit represented by the UNION regardless of
their position and pay rates, in the event that the government shall direct another increase(s)
in the statutory minimum wage fixed under P.D. 928 within the period of three years from the
signing of this instrument. The uniform increase contemplated in this instrument will be
equivalent to the amount of the statutory wage increase or adjustment.”

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50320 March 30, 1988

PHILIPPINE APPAREL, WORKERS UNION, petitioner,

vs.
THE NATIONAL LABOR RELATIONS COMMISSION APPAREL PHILIPPINE APPAREL,
INC., respondents.

RESOLUTION

PARAS, J. :

This is a classic case of dilatory tactics employed to obstruct justice.

On July 31, 1981, this Court rendered Judgment in this case, the dispositive portion of which reads:
 WHEREFORE, the writ of certiorari is hereby granted, the decision of the respondent
Commission is hereby set aside, and private respondent is hereby directed to pay, in
addition to the increased allowance provided for in P.D. 1123, the negotiated wage
increase of P0.80 daily effective April 1, 1977 as well as all other wage increases
embodied in the collective bargaining agreement, to all covered employees. Costs
against private respondent.

This decision, is immediately executory (p. 178, rec.).

A motion for reconsideration of the July 31, 1981 decision. this Court was filed by private
respondent. Petitioner, through the Paterno D. Menzon Law Office, filed a comment thereon. This
Court, on October 21, 1981 denied the aforesaid motion for reconsideration and the denial was
declared final Entry of judgment was made on October 30, 1981 (Rollo, p. 244).

On December 18, 1981 the respondent NLRC issued an order, through Labor Arbiter Antonio Tria
Tirona, directing the Chief of the Research and Information Division of the NLRC to designate a
Socio-Economic Analyst to compute the awards due the members of the petitioner union in
accordance with the final disposition of this case.

On January 10, 1983 petitioner flied an "Urgent Manifestation and Motion" claiming that despite its
filing of a motion for execution dated November 12, 1981, a manifestation and motion dated
February 10, 1982, and another manifestation and motion dated February 26, 1982, the execution
arm of public respondent NLRC continued to fail to implement the decision of this Court. Petitioner
prayed that those obstructing the implementation of the decision be declared in contempt, especially
the president of Bagong Pilipino Philippine Apparel Workers' Union (BPPAWU) and private
respondent PAI for circumventing the final decision of this Court by offering members of petitioner
the amount of P500 each as full payment of their claims in the instant case.

The respondent NLRC, in its Comment on petitioner's "Urgent Manifestation and Motion" explained
that it could not issue a writ of execution because the actual or exact amounts of the various awards
due the members of the petitioner union could not be determined. For that matter, even with the
submission of the "Report of Examiner" prepared by the Research and Information Division of the
NLRC, it was not possible for the NLRC to issue a writ of execution in full satisfaction of the
judgment of this Court because said "Report of Examiner" did not include the computation of the
amounts due for the months of May, June, November and December 1978, and January and
February 1980 as the pertinent records covering those periods were not available at the time of the
preparation of the Report. Adding confusion was the fact that even before the submission of the
"Report of Examiner," private respondent PAI had already made payments in satisfaction of this
Court's decision to some of the members of the petitioner union. Moreover, after the submission of
the Reports, and notwithstanding its exception to the findings therein, private respondent PAI
continued to make payments to the other members of the union. Respondent PAI offered the
payment to petitioner's counsel but the latter refused to accept the payment because the amount
offered left some 88 members of the petitioner unpaid. Petitioner's counsel was willing to accept the
money only as partial payment, but not as full payment as PAI wanted it to be.

On October 27, 1983, this Court issued an order requiring private respondent PAI to comply fully
with this Court's decision of July 31, 1981; to pay the members of the petitioner the amount of
P695,413.17, with 10% thereof to be deducted as attorney's fees payable to the Menzon Law Office;
to make available, within ten (10) days from notice thereof, to public respondent its payrolls
corresponding to the unpaid periods, for the latter to prepare immediately a computation within thirty
(30.1 days from receipt of such payrolls; and, thereafter, to pay members of petitioner the remaining
backwages within ten (1 0) days from receipt of such computation. In that same order of October 27,
1983, the BPPAWU, Atty. Luis D. Flores and respondent Philippine Apparel, Inc. were adjudged
guilty of contempt and were ordered to pay one thousand pesos (Pl,000) each within ten (10) days
from notice thereof.

The Court justified its ruling as follows:

...The judgment in this case has already become final and executory and as such the
prevailing party as a matter of right is entitled to a writ of execution. What seems to
be the problem in this case is that execution of the judgment cannot be had at the
earliest possible time, since a computation of the amount due the members of
petitioner must first be undertaken. The Report of the Examiner indicating the
amount due them was submitted only after one and a half years, so that in the
meantime, negotiations on how the judgment may be executed were made. It is the
posture of the Paterno D. Menzon Law Office that the judgment cannot be
negotiated, hence any act to subvert it is contemptuous.

We agree, The attempts of the BPPAWU and its counsel and respondent company
to render the decision of this Court meaningless by paying the backwages of the
affected employees in a lesser amount clearly manifest a willful disregard on their
part, of the authority of this Court as the final arbiter of cases brought to it. The series
of acts by the BPPAWU from the outset, where they caused the 'Kapahintulutan' to
be circulated and signed by workers declaring as invalid any acts of petitioner union
and its counsel to the time they campaigned for the workers to receive the amount of
P300.00 or P500.00 but with the concomitant obligation to release the company from
any further liability showed disrespect for the administration of justice.

The BPPAWU and its counsel cannot pretend that they are just being more
protective to the employees when they encouraged them to receive the amount of
P300.00 or P500.00. They know too well that said amount is much less than that to
be received by the employees after computing all the backwages if the decision is
executed. It would have been laudable had not the company pressed the workers to
sign the quitclaims and release of which the BPPAWU cannot pretend to be
unaware, for the payment could be taken as initial compliance with the judgment with
the balance to be paid by the company when the final computation of the backwages
has been finished and submitted by the Research and Information Division of the
National Labor Relations Commission. Indeed, their questionable acts do not sit well
with a desire to implement the decision of this Court. If the BPPAWU is really after
the welfare of the employees, they will not leave any stone unturned to get the best
for them by giving effect to the decision of this Court.

In our decision, we have ordered the company to pay the negotiated wage increase
of P0.80 daily effective April 1, 1977. As per petitioner's; computation, as may be
gleaned from the urgent motion for issuance of a restraining order dated March 11,
1982, on backwages alone, not counting adjustments in overtime pay and other
benefits, each employee is entitled to receive at the very least of Pl,248.00 (P0.80 x
26 working days x 12 months x 5 years from 1977 to 1982) [p. 281, recli If we shall
include the backwages corresponding from January, 1983 to the present, the same
will definitely be higher than Pl,248.00. Clearly, the offer by the company, supported
by the BPPAWU to pay the employees in the amount of P300.00 or P500.00 as full
and final payment is unjust to them, especially if We shall consider that some
employees did not have the alternative but to accept the payment because they were
in a tight financial condition. Such move cannot he sanctioned by this Court, for
 otherwise giving effect to the award of backwages would be left to the whim of the
losing company taking advantage of the rationale behind the decision in Mercury
Drug Co. v. CIR (L-23357, promulgated April 30, 1974, 56 SCRA 695), the quitclaims
and releases signed by the employees are considered null and void. The employees
are therefore still entitled to the difference between what is due them and the amount
they received. Another important consideration is that if We countenance such act,
the sanctity of the contract validly entered into by the parties which as in this case
was interpreted by this Court, will be violated. Rollo, pp. 382-384)

In their obvious attempts to derail the implementation of this Court's decision which had long become
final and executory as far back as over six years ago on October 21, 1981, private respondents
endlessly belabored this Court's ruling finding them guilty of contempt. Enough is enough. If there is
anything that needs to be done in this case, it is the fun and complete implementation of this Court's
final and executory decision.

PREMISES CONSIDERED, We hereby enjoin the respondent NLRC to fully implement this Court's
Resolution dated October 27,1983, with these modifications: (a) To pay members of the petitioner
the partial backwages in the amount of P695,413.17 plus legal interest computed from the time the
decision became final (October 21, 1981) until fully paid, with 10% thereof to be deducted as
attorney's fees payable to the Menzon Law Office, less the amount that respondent company may
have paid to some members of the petitioner union; and (b) The BPPAWU Atty. Luis D. Flores and
respondent Philippine Apparel, Inc. are hereby adjudged guilty of contempt and are ordered to pay
TEN THOUSAND (P10,000.00) PESOS each within ten (10) days from notice thereof. This
resolution is immediately executory.

SO ORDERED.

Yap (Chairman), Melencio-Herrera, Padilla and Sarmiento JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila

SECOND DIVISION

G.R. No. L-50320 October 27, 1983

PHILIPPINE APPAREL WORKERS UNION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and PHILIPPINE APPAREL, INC., respondents.

Paterno D. Meanzon Law Office for petitioner.

Armando V Ampil for respondent PAI.

the Solicitor General for respondent NLRC.

 RESOLUTION

MAKASIAR, J.:

On July 31, 1981, this Court rendered judgment in this case, the dispositive portion of which reads:

WHEREFORE, THE WRIT OF certiorari IS HEREBY GRANTED, THE DECISION

OF THE RESPONDENT COMMISSION IS HEREBY SET ASIDE, AND PRIVATE
RESPONDENT IS HEREBY DIRECTED TO PAY, IN ADDITION TO THE
INCREASED ALLOWANCE PROVIDED FOR IN P.D. 1123, THE NEGOTIATED
WAGE INCREASE OF P0.80 DAILY EFFECTIVE APRIL 1, 1977 AS WELL AS ALL
OTHER WAGE INCREASES EMBODIED IN THE COLLECTIVE BARGAINING
AGREEMENT, TO ALL COVERED EMPLOYEES. COSTS AGAINST PRIVATE
RESPONDENT.

THIS DECISION IS IMMEDIATELY EXECUTORY (p. 178, rec.).

On August 6, 1981, the Paterno D. Menzon Law Office, petitioner's counsel, filed a notice of
attorney's lien which was noted by this Court in the resolution of August 24, 1983 (pp. 209-212, rec.).
Subsequently, the said law office filed a motion to declare in contempt the Bagong Pilipino Philippine
Apparel Workers Union (BPPAWU for short) and its officers and counsel, Atty. Luis D. Flores,
alleging that said union and its counsel, who are not parties in interest in this case, have caused to
be circulated a "Kapahintulutan", authorizing BPPAWU and Atty. Flores to "have a hand in the
'negotiation' for the payment of backwages to members of the union" under the decision of this Court
on July 31, 1981; that contrary to public policy, and illegally, the BPPAWU agreed with respondent
company to have the first year's wage increase under the collective bargaining agreement in the
amount of P2.00 fully credited against the P2.00 living allowance under Wage Order No. 1; and that
considering the conduct of the BPPAWU, it is not remote that the PO.80 daily wage increase
ordered by this Court to be paid by respondent company PAI to the workers will be negotiated away
or greatly reduced (p. 213, rec.).

In the meanwhile, a motion for reconsideration of the decision of this Court on July 31, 1981 was
filed by private respondent (p. 218, rec.). Petitioner, through the Paterno D. Menzon Law Office, filed
a comment thereon (p. 229, rec.). This Court, on October 21, 1981 denied the aforesaid motion for
reconsideration and the denial was declared final. Entry of Judgment was made on July 31, 1981
(pp. 235 and 244, rec.).

On the motion for contempt, BPPAWU through its lawyer Atty. Luis Dizon Flores in its comment,
explains that the BPPAWU was certified by the Ministry of Labor and Employment, in an order dated
December 12, 1980, as the sole and exclusive bargaining agent of all the regular rank and file
workers of the Philippine Apparel, Inc., after it won in the certification election conducted on
December 6, 1980; that members of petitioner applied for membership with the BPPAWU; that as
members, they authorized the BPPAWU to represent them and execute the decision of this Court;
that the allegations of petitioner that the PO.80 daily wage increase ordered by this Court to be paid
by respondent company will be negotiated away by the BPPAWU is without basis and untenable,
that the authority granted by the workers to the BPPAWU is a consequence of the termination of the
services of Atty. Paterno Menzon as counsel of record in this case and the fact that the workers are
now members of the BPPAWU; and that the claim of petitioner that the provision in the new
collective bargaining agreement concluded by the BPPAWU with respondent company that the
amount of P2.00 wage increase for the first year be fully credited against the P2.00 emergency living
allowance under Wage Order No. 1 is against public policy is a gross misrepresentation because at
the time when the collective bargaining negotiations were going on which resulted in the signing of
the new collective bargaining agreement on June 25, 1981, the decision of this Court has not yet
been promulgated and therefore the parties were then unaware of the legal implication thereof (p.
245, rec.).

Petitioner, in its reply dated January 6, 1982 to the foregoing comment, claims that the Paterno D.
Menzon Law Office has always been the counsel of petitioner union from the time the instant case
was filed in the Ministry of Labor and Employment up to the present, so that it follows that execution
of the decision should be handled by it; and that the services of petitioner's counsel have not been
terminated (p. 257, rec.).

Notably, in addition to the foregoing, petitioner alleges that the officers and board members of
BPPAWU have caused the printing of a special check-off authorization which purportedly allows the
paymaster of the Philippine Apparel, Inc. and/or the deputy sheriff of the National Labor Relations
Commission to check off from the backwages of the employees in the instant case "the amount of
P as special assessment for legal expenses and to remit the same to the Treasurer of the Bagong
Pilipino Philippine Apparel Workers Union or its duly authorized representative to receive said
amount." Petitioner prays that a temporary restraining order be issued in this case enjoining the
officers and counsel of the BPPAWU and the NLRC from collecting and/or deducting any special
assessment for legal expenses.

Petitioner also filed an urgent manifestation and motion dated January 10, 1983 claiming that
despite the filing by petitioner of a motion for execution dated November 12, 9981, manifestation and
motion dated February 10, 1982 and another manifestation and motion dated February 26, 1982 and
an urgent motion for issuance of a writ of execution dated January 27, 1983, the execution arm of
public respondent has still failed to implement the decision of this Court; and that meanwhile, the
President of the BPPAWU had been spreading rumors that members of petitioner cannot get the
P0.80 daily wage increase awarded by this Court and encouraging members to receive a mere
P500.00 upon signing a release and quitclaim that said amount represents a full settlement of their
backwages, etc. in contravention of the final decision of this Court. Petitioner prays that public
respondent be ordered to immediately execute the aforesaid decision and those obstructing the
implementation thereof be declared in contempt (p. 298, rec.).

Two separate manifestation and motion were filed subsequently by petitioner, the first one dated
February 5, 1982, reiterating its prayer for a temporary restraining order; and the second, dated
February 10, 1982, reiterating its prayer that Rafael Damicog, the President of the BPPAWU, and its
lawyer, Atty. Luis Dizon Flores, be declared in contempt on the alleged ground that during a general
meeting of the employees on January 28, 1982, Damicog and Flores told the employees involved in
the decision that they could be paid the amount of P300.00 the following day if they will just agree
that the same shall be considered as full payment of all their claims in this case (pp. 263 and 266,
rec.).

On February 15, 1982, the Court issued a temporary restraining order which reads:

As prayed for in petitioner's reply to comment of respondents or, the motion, to

declare the members and officers of respondent in contempt and in petitioner's
manifestation and urgent motion, the Court Resolved to ISSUE effective immediately
and until further order a TEMPORARY RESTRAINING ORDER enjoining the officers
of Bagong Pilipino Philippine Apparel Workers Union, their counsel, Atty. Luis D.
Flores, the Philippine Apparel, Inc. and the public respondent from collecting and/or
deducting any special assessment for legal expenses from the backwages of the
 employees in the case at bar in favor of respondent union or any of its officers,
representatives, or its counsel ... (p. 271, rec.).

The BPPAWU and its officers in their comment (rejoinder) on the reply dated January 6, 1982 and
motion for a temporary restraining order, deny the allegations of petitioner, averring that petitioner
has no more members in the rank and file unit of the company by virtue of their withdrawal therefrom
and subsequent membership with the BPPAWU; the special assessment for legal expenses was in
accordance with the Union's Constitution and By-Laws; that at any rate, it was not pushed through
by the said Union even before the restraining order was issued in this case; that the services of the
Paterno D. Menzon Law Office as counsel in this case have been terminated by the workers who are
bona fide members of the BPPAWU; and that there is no truth to petitioner's imputation that they are
working or assisting the Philippine Apparel, Inc relative to any amicable settlement of the case (p.
293, rec.).

Commenting on the manifestation and motion for execution of this Court's decision, respondent
company alleges that the examiner's report on the backwages of P695,000.00 more or less, was
furnished PAI in February, 1983; that respondent company took issue with the validity of the findings
herein contained, but nevertheless rendered remittance thereon as evidenced by the receipts of
payments received by the workers of Philippine Apparel, Inc.; and that Atty. Menzon did not specify
the acts constituting obstruction in the implementation of the Court's decision (P. 309, rec.).

Petitioner filed its reply on April 30, 1983 to the foregoing comment stating that it has filed an urgent
manifestation and motion with the public respondent and submitting as annex the affidavit of Editha
M. Sopoco et al. to the effect that they have not received a single centavo from Philippine Apparel,
Inc.; that private respondent filed with the public respondent a petition to consider the case closed
and terminated on the basis of the release and quitclaim signed by the employees to which petitioner
filed an opposition stating that the receipt of P500.00 each by the affected employees did not
extinguish the liability of Philippine Apparel, Inc. as the release and quitclaim is null and void, and
praying that public respondent be ordered to issue a writ ordering Philippine Apparel, Inc. to
integrate the daily wage increase of P0.80 effective immediately; to pay the partially computed
backwages up to March 31, 1980 totalling P695,413.37; to deduct 10% from P695,413.37 as
attorney's fees of Paterno D. Menzon law Office; and finally, that public respondent be ordered to
complete the computation of backwages to cover the period from April 1, 1980 until integrated (p.
322, rec.).

The BPPAWU belatedly filed its comment on the urgent manifestation and motion dated January 10,
1983 wherein it denies the allegation of petitioner that it had connived in spreading the rumors that
the P0.80 wage increase would not be given and that it had actively campaigned for the members to
receive a mere P500.00 and alleges that BPPAWU did not have any participation in the payment of
backwages by the company (p. 340, rec.).

Likewise commenting on petitioner's urgent manifestation and motion dated January 10, 1983 was
the Solicitor General who avers that public respondent has not been recreant or remiss in the
discharge of its functions relative to the execution of the decision of this Court. In support thereof,
the Solicitor General explains that respondent Commission, after receiving on December 17, 1981
the records of this case issued an order requiring and directing the chief of the Research and
Information Division of the NLRC to compute the awards due the affected employees; that said
division submitted the report of examiner on January 24, 1983 stating that the sum of P695,413.37 is
the amount partially due them and that the corresponding computation for the months of May, June,
November and December, 1978 were not included in the report as the records for these months
were not available; and that the various pleadings filed by petitioner praying for the execution of the
decision was filed before the report was completed and submitted (p. 344, rec.).
The Solicitor General in the same comment noted that even before the submission of the Report of
Examiner, respondent company had already settled and made satisfaction of the judgment in
question to some of petitioner's members; that. after its submission, notwithstanding the company's
objection to the findings therein, private respondent still settled and made payments to some more of
the complaining members and took steps to satisfy the amounts due the rest of the latter; and that it
was petitioner's counsel who refused or rejected the checks being tendered or offered by private
respondent (ibid.).

A supplemental comment on petitioner's motion for execution was filed by respondent company
wherein it was averred that the Philippine Apparel, Inc. cannot be held liable for contempt in seeking
releases and quitclaims from the recipients, as the company had already made payments in
compliance with the judgment of this Court (p. 358, rec.).

Petitioner filed a reply to the above supplemental comment claiming that the releases and quitclaims
were utilized to avoid Payments for differentials in wages, vacation and sick leaves, overtime pay;
that the company would only release the amounts to the affected employees if they will agree that
such amounts would be in full payment of their claims: that the mere filing of a petition to declare the
case closed and terminated constitutes contempt, and praying among others, that private
respondent be ordered to pay members of petitioner the amount of P695,41,413.37 pursuant to the
computation of public respondent's examiner as partial payment; and that private respondent be
ordered to deduct 10% from said P695,413.37 as attorney's fees of the Paterno D. Menzon Law
Office pp. 362, rec.).

The judgment in his case has already become final and executory and as such the prevailing party
as a matter of right entitled to a writ of execution. What seems to be the problem in this case is that
execution of the judgment cannot be had at the earliest possible time, since a computation of the
amount due the members of petitioner must first be undertaken. The Report of the Examiner
indicating the amount due them was submitted only after one and a half years, so that in the
meantime, negotiations on how the judgment may be executed were made. It is the posture of the
Paterno D. Menzon Law Office that the judgment cannot be negotiated, hence any act to subvert it is
contemptuous.

We agree. The attempts of the BPPAWU and its counsel and respondent company to render the
decision of this Court meaningless by paying the backwages of the affected employees in a lesser
amount clearly manifest a willful disregard on their part, of the authority of this Court as the final
arbiter of cases brought to it. The series of acts by the BPPAWU from the outset, where they caused
the "Kapahintulutan" to be circulated and signed by workers declaring as invalid any acts of
petitioner union and its counsel to the time they campaigned for the workers to receive the amount of
P300.00 or P500.00 but with the concomitant obligation to release the company from any further
liability showed disrespect for the administration of justice.

The BPPAWU and its counsel cannot pretend that they are just being more protective to the
employees when they encouraged them to receive the amount of P300.00 or P500.00.They know
too well that said amount is much less than that to be received by the employees after computing all
the backwages if the decision is executed. It would have been laudable had not the company
pressed the workers to signed the quitclaims and release of which the BPPAWU cannot pretend to
be unaware, for the payment could be taken as initial compliance with the judgment with the balance
to be paid by the company when the final computation of the backwages has been finishedand
submitted by the Research and Information Division of the National Labor Relations Commission.
Indeed, their questionable acts do not sit well with a desire the implement the decision of this Court.
If the BPPAWU is really after the welfare of the employees, the will not leave stone unturned to get
the best of them by giving effect to decision of this Court.
In Our decision, we ordered the company to pay the negotiated wage increase of P0.80 daily
effective April 1, 1977. As per petitioner's computation, as may be gleaned from the urgent motion
for issuance of a restraining order dated March 11, 1982. on backwages alone, not counting
adjustments in overtime pay and other benefits, each employee is entitled the receive at the very
least P1,248.00 (P0.80 x 26 working days of 12 months x 5 years from 1977 to 1982) [p. 281, rec]. If
we shall include the backwages corresponding from January 1983 to the present, the same will
definitely be higher than P1,248.00. Clearly, the offer by the company supported by the BPPAWU to
pay the employees in the amount of P300.00 or P500.00 as full and final payment is unjust to them,
especially if We shall consider that some employees did not have the alternative but to accept the
payment because the were in a Light financial condition. Such move cannot be sanctioned by this
Court, for otherwise giving effect to the award of backwages would be left to the whim of the losing
company taking advantage of the financial condition of the workers. Following the rationale behind
the decision in Mercury Drug Co. v. CIR (L-23357, promulgated April 30, 1974, 56 SCRA 695), the
quitclaims and releases signed by the employees are considered null and void. The employees are
therefore still entitled to the difference between what is due them and the amount they received.
Another important consideration is that if We countenance such act, the sanctity of the contract
validly entered nito by the parties which as in this case was interpreted by this Court, will be violated.

As regards the question that arises as to who, between the two lawyers should represent the
petitioner's members in the execution of the decision, We hold that it is the Paterno D. Menzon law
Office. The latter was petitioner's counsel from the inception of the case until it reached its final
successful conclusion, in fact, the Comment in the motion for reconsideration of the decision of this
Court was filed by said law office.

The BPPAWU's contention that the Paterno D. Menzon law Office has already been substituted by
Atty. Flores as its (the Paterno D. Menzon law Office's) services had already been terminated, is
without merit. The fallacy of such contention lies in the fact that there can be no valid substitution of
counsel unless the required procedure prescribed by Rule 138, Section 26 of the Revised Rules of
Court has been complied with. As underlined in the case of Aban v. Enage, L-30666, promulgated
on February 25, 1983, "no substitution of attorney will be allowed unless the following requisites
concur: (1) there must be filed a written application for substitution; (2) there must be filed the written
consent of the client to the substitution; (3) there must be filed the written consent of the attorney to
be substituted, if such consent can be obtained; and (4) in case such written consent cannot be
procured, there must be filed with the application for substitution, proof of the service of notice of
such motion in the manner required by the rules, on the attorney to be substituted."

In the present case, the foregoing requisites were never complied with, hence, the alleged
substitution by Atty. Flores of the Paterno D. Menzon Law Office is void and ineffective.

The BPPAWU's contention that the members of the petitioner have already affiliated with it, is of no
moment considering that the question involved is not what union should represent the members but
what law office lawfully represents the members in court in the case at bar.

According to the Paterno D. Menzon law Office, the retainer agreement between him and the union
is 10% of the amount due the members as attorney's fees. Such agreement is in accordance with
the Labor Code which provides:

Art. III. Attorney's fees.—

(a) In cases of unlawful withholding of wages the culpable party may be assessed
attorney's fees equivalent to ten percent of the amount of wages recovered.
 (b) ...

and Section 11 of Rule VIII of the implementing rules which provides:

Sec. 11. Attorney's fees.—Attorney's fees in any judicial or administrative proceeding

for the recovery of wages shall not exceed 10% of the amount awarded. The fees
may be deducted from the total amount due the winning party.

WHEREFORE, RESPONDENT COMPANY IS HEREBY ORDERED:

1. TO IMMEDIATELY COMPLY WITH THE DECISION OF THIS COURT DATED

JULY 31,1981;

2. TO PAY MEMBERS OF PETITIONER THE PARTIAL BACKWAGES IN THE

AMOUNT OF P695,413.17, WITH 10% THEREOF TO BE DEDUCTED AS
ATTORNEY'S FEES PAYABLE TO THE MENZON LAW OFFICE;

3. TO MAKE AVAILABLE WITHIN TEN (10) DAYS FROM NOTICE HEREOF TO

PUBLIC RESPONDENT ITS PAYROLLS CORRESPONDING TO THE UNPAID
PERIODS FOR THE LATTER TO PREPARE IMMEDIATELY A COMPUTATION
WITHIN THIRTY (30) DAYS FROM RECEIPT OF SUCH PAYROLLS; AND

4. THEREAFTER, TO PAY MEMBERS OF PETITIONER 'THE REMAINING

BACKWAGES WITHIN TEN (10) DAYS FROM RECEIPT OF SUCH
COMPUTATION.

THE BPPAWU, ATTY. LUIS D. FLORES AND .RESPONDENT PHILIPPINE APPAREL, INC. ARE
HEREBY ADJUDGED GUILTY OF CONTEMPT AND RE ORDERED TO PAY ONE THOUSAND
(P1,000.00)

IT PESOS EACH WITHIN TEN (10) DAYS FROM NOTICE HEREOF.

SO ORDERED

Aquino, Concepcion, Jr., Guerrero and Escolin, JJ., concur.

Abad Santos J., took no part.

Castro, J., is on leave.